National Pension Scheme: The Central government has announced a massive new-year bonus for government employees as it has approved the proposal to raise government’s contribution to the National Pension Scheme (NPS). The Union Cabinet has agreed to raise government’s contribution to 14 per cent of the basic salary from the current 10 per cent, news agency PTI quoted its sources as saying. However, it is also said that the minimum employee contribution will remain the same at 10 per cent. The Cabinet also approved tax incentives under 80C of the Income Tax Act for employees’ contribution to the extent of 10 per cent, they added. As of now, both government and the employee contribute 10 per cent of the basic salary each under the pension scheme.

The report goes ahead to say that Prime Minister Narendra Modi-headed Cabinet has also allowed government employees to commute 60 per cent of the fund accumulated at the time of retirement. Currently, employees can commute 40 per cent of the fund accumulated. Also, employees will have the option to invest in either fixed income instruments or equities, sources said.

It is to be noted that none of these aforementioned changes will be application for employees associated with private organisations. According to the decision made by the Cabinet, if an employee does not want to commute any portion of accumulated funds in NPS while his/ her retirement and transfer all amount to the annuity scheme, then the employee’s pension would be 50 per cent of his/ her last drawn pay.

The government is yet to take a call the notification date for the new scheme, sources said that such changes usually come into effect from the starting of the new financial year – which in this case is April 1, 2019. The sources also mentioned that changes in the NPS structure was made by the Ministry of Finance based on the recommendation of a government-appointed committee.